Tight oil, deepwater or oil sands: which will attract more money?

By Staff | February 20, 2018

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Although it may be unclear what happens after 2025, the EIA believes it is clear which type of oil recovery process will yield the greatest global investment in the next seven years. “Through 2025, U.S. tight oil is expected to attract the largest share of global investment compared with deepwater and oil sands projects,” said Victoria Zaretskaya, lead industry economist for the office of petroleum, natural gas and biofuels analysis at EIA. Primarily, Zaretskaya also said, “because tight oil projects involve short-cycle investments that can provide cash flow within a few years of the initial investment.”

During the same period, tight oil will be the fastest growing supply source in the global market, EIA said, increasing from 4.6 million barrels per day produced in 2016 to roughly 6 million b/d in 2025. U.S. projects will account for more than half of all tight oil investments for the foreseeable future.

Uncertainties with production history and technology developments make predicting the future of tight oil difficult. Large portions of the known formations have little or not production history, EIA said. And, as sweet spots in certain plays become exhausted, development in less likely areas could yield different results. But, technology advancements along with continued high rates of drilling could increase well productivity and reduce drilling, completion and production costs more than expected, EIA added.

Outside of the U.S. the major areas where shale energy could occur are Argentina, Russia, Canada and China.

Argentina has a large tight oil resource base and some presence of industry and midstream assets, but drilling rig, completion crews, proppant shortages there make ramp-up difficult. By 2040, shale energy resource production there could reach 400,000 barrels per day. Currently, the country produces approximately 32,000 b/d.

Russia’s Bazhenov formation is considered to have the largest tight oil resource in the world. Access to financing in the west and a stronger commitment from Russian government will restrict the increase in tight oil production there and by 2040, EIA predicts Russia will only be producing 300,000 b/d of tight oil.

Canada will continue to develop its shale resources in the Duvernay and Montney with the Duvernay receiving most of the attention.

China has tight oil formations, but they are featured in differing geology than the U.S. and horizontal drilling may not work as well. The country has also prioritized natural gas over tight oil.